Erie Ins. Ech. v. Heffernan

Mallory Heffernan, a Maryland resident and a minor, was killed in a car accident in Delaware. The car’s driver, John McMahon, Jr., also a Maryland resident, fell asleep at the wheel as he was driving Mallory and another passenger home to Maryland after going to Pennsylvania to a concert. The car belonged to John’s mother, Angela McMahon, and he was an underinsured driver. Mallory’s parents, Edmund and Diane Heffernan (the Heffernans) (plaintiffs), had an insurance policy with Erie Insurance Exchange (Erie) (defendant) that included underinsured coverage. The underinsured coverage provided that Erie would pay damages that the law entitled the Heffernans to recover from the McMahons. The policy was issued, sold, and delivered in Maryland. The Heffernans were unable to resolve coverage with Erie. Erie claimed that the Heffernans had negligently denied Mallory permission to stay the night at a friend’s house and had insisted that she come home, despite knowing that John was too tired to drive. The parties also disagreed about which state’s law applied to the Heffernans’ claim. The Heffernans filed suit in Maryland state court, seeking damages under their underinsured coverage. The Heffernans claimed that Delaware law on comparative negligence and assumption of the risk applied, and Erie argued that Maryland law applied. The trial court certified the issue to the Maryland Court of Appeals.